Indian Accounting Standard (Ind AS) 19 Summary
Indian Accounting Standard (Ind AS) 19, Employee Benefits specifies the accounting for various types of employee benefits, including:
– Benefits provided for services rendered – e. g. pensions, lump-sum payments on retirement, paid absences and profit-sharing arrangements, and
– Benefits provided on termination of employment.
Post-employment plans are classified as:
– Defined contribution plans – plans under which the entity pays a fixed contribution in to a fund and will have no further obligation, and
– Defined benefit plans – all other plans.
Liabilities and expenses for employee benefits that are provided in exchange for services are generally recognised in the period in which the services are rendered.
The costs of providing employee benefits that are recognised in profit or loss or Other Comprehensive Income (OCI), unless other Ind ASs permit or require capitalisation.
To account for defined benefit post-employment plans, the entity:
– Determines the present value of a defined benefit obligation by applying an actuarial valuation method,
– Deducts the fair value of any plan assets,
– Adjusts for any effect of the asset ceiling, and
– Determines services costs and net interests (recognised in profit or loss) and remeasurements (recognised in OCI).
If insufficient information is available for multi-employer defined benefit plan to be accounted for as a defined benefit plan, then it is treated as a defined contribution plan and additional disclosures are required.
If the entity applies defined contribution plan accounting to a multi-employer defined benefit plan and there is an agreement that determines how a surplus in the plan would be distributed or a deficit in the plan funded, then an asset or a liability that arises from the contractual agreement is recognised.
If there is a contractual agreement or stated policy for allocating a group’s net defined benefit cost, then participating group entities recognise the cost allocated to them.
If there is no agreement or policy in place, then the net defined benefit cost is recognised by the entity that is the legal sponsor, and other participating entities expense their contribution payable for the period.
Short term employee benefits – i.e. those that are expected to be settled wholly within 12 months after the end of the annual reporting period in which the employees render the related service – are expensed as they are incurred, except for termination benefits.
The expenses for long-term employee benefits, calculated on discounted basis, is usually accrued over the service period
A termination benefit is recognised at the earlier of:
– The date on which the entity recognises costs for a restructuring in the scope of the provisions standard that includes the payment of termination benefits, and
– The date on which the entity can no longer withdraw the offer of the termination benefits.